Gold Remembers, So That You Can Forget

You will never, ever make money by owning gold because that's not the purpose of owning gold. 

In practical terms, you must sell the good currency (gold) to buy the bad currency (US dollar) before it can be used. Gresham's law in reverse. Whether that's 1200 an ounce or 2000 an ounce makes no difference. Gold simply represents how much the currency has been debauched. Gold holds steady while the US dollar flops around like a fish on the riverbank. As the dollar rises- as it has been doing recently because of rate hikes- gold's value goes down. When rates go down and money is sloshing around everywhere- the value of gold goes up. It has always been that way.

That's the way gold moves in the short term. Longer term...

Gold has a US dollar inverse relationship. It sniffs out dollar debauchery and moves accordingly. It is the perfect barometer. Gold was 35 bucks an oz in 1971. It is 1830 bucks in 2023. That 5000% rise over 52 years represents the lost buying power of a dollar via inflation and excess money printing. If you owned gold during that timeframe, you haven't gained anything, you have simply maintained your buying power relative to the collapsing value of a dollar.

Last week, out of the blue, an old friend of mine asked me how much gold I had. It wasn't the quantity part of the question that intrigued me, it was the purpose of the question in the first place.

The vast majority of people, and I am talking in the 98% range, have no idea where money comes from and are completely clueless as to why anyone would want to own gold. They simply don't understand.

People snicker because they haven't faced the disaster of being wiped out financially by a government working in concert with a central bank. Not only that, but they have normalcy bias. 

It has never happened before, therefore it can't happen. That's what they think.

Today I read a remarkable piece of writing that happens to mirror my thoughts with absolute precision. The author nails the heart of the matter. https://goldswitzerland.com/powells-gettysburg-moment-the-usds-waterloo-todays-open-madness/ The FED will raise rates, which strengthens the dollar, until they can no longer raise rates trying to kill the "inflation" they caused. We refinance half of our debt annually. Can you imagine the interest expense of 17 trillion at 7%? About 1.2 trillion.

Oh yea, and that other 17 trillion financed long term at 4% or so? About 700 billion. Altogether and very quickly, we are going to pay about 1.9 trillion a year in interest expense. 

The CBO's best case is 1.4 trillion a year in interest expense. Experience has taught me two things about the CBO. They are always best case forward looking and they are never correct. They always underestimate (and get the drum roll please) new wars and new legislation which always occur on top of higher rates. Here's the latest from them and it ain't rosy. Remember, this is best case! https://www.cbo.gov/system/files/2023-02/58848-Outlook.pdf

What is the world going to look like in 10 years?

It's going to suck. The IRS will be trying to steal everything they can get their grubby hands on. That's why they hired 87,000 new IRS agents. The politicians know what they have done. The hints are there. All you have to do is pay attention.

There will be a huge buying opportunity for gold and it will come soon. Gold will collapse as the economy collapses. People will rush out of markets as they are getting fleeced. They will dump their assets into anything safe with a return. Time deposits.

Commodities will collapse as demand collapses. At some point in that 2 year period gold will find new lows. I think sub 1180 is possible and maybe sub 1000. This will be a time when our GDP gears grind to a halt. Demand for goods and services will be gone. People will be out of work. They will not be paying taxes. Annual deficits will soar. Gold mining will cease because gold prices will have sunk and miners cannot effectively make money mining with low gold prices. Gold will be on sale. 

I think the government may try to steal individual retirement accounts. 

When things are so bleak- that's the moment to pounce. I cannot tell you when that will be- all I can assure you of- is that it will happen. I do not know the depths we will plumb this time as we try to spend our way into prosperity once again. I don't see anyone buying our debt. We are a terrible credit risk. If you fail to buy gold at that bottom- you will be priced out.

While people struggle to get by, you will know the future. The FED will restart the free money train all over again. They will slash rates to near zero, time deposits will evaporate, the U.S. will quite probably lose reserve currency status. The price of everything (inflation) will skyrocket. 

Demand for gold will also go supernova- to the extent that- you may not be able to get your hands on it. Dealer premiums will soar. If you didn't buy at the bottom you sure as hell can't buy at the top.

I can envision a day when a few ounces of gold may settle a mortgage debt. Gold remembers. The FOFOA blog.

Halfway through the interview, I ask him where does he see the price of gold reaching in the days to come. “Well, I don’t see gold’s trajectory being typical of what you’d expect to see in a bull market… And I expect that physical gold will be repriced somewhere around $55,000 per ounce in today’s purchasing power. I have to add that purchasing power part because it will likely be concurrent with currency devaluation,” he replies.

Meet FOFOA, an anonymous blogger whose writings on fofoa.blogspot.com, have taken the world by storm over the last few years. In a rare interview – one of his preconditions was he’ll not be photographed — he talks about paper money, the fall of the dollar, the coming hyperinflation and the rise of ‘physical’ gold.